Monthly Archives: February 2017

Crocker Partners sold a 28-story office tower in downtown Fort Lauderdale to an affiliate of Walton Street Capital for $86.75 million.

Records show Crocker affiliate One Financial Plaza LLC sold the building at 100 Southeast Third Avenue to W-Crocker Fin Place Owner VIII LLC, which is controlled by Doug Welker, principal of asset management at Walton Street Capital, a private equity firm based in Chicago. The buyer financed the deal with a $61.23 million loan from SunTrust.

The deal marks the first large sale of an office building in Fort Lauderdale this year. It breaks down to about $314 per square foot.

The 276,572-square-foot Class A office building was built in 1972, and was originally known as the Landmark Bank Tower. When it opened, it was the tallest building in Fort Lauderdale, and is now the sixth-tallest, according to Emporis. One Financial Plaza was renovated in 2011, data from Real Capital Analytics shows. Crocker Partners paid $44 million for the 4-acre property in 2011.

Tenants include the Tower Club restaurant on the penthouse level, anchor tenant Regions Bank, Pipeline Workspaces, AXA Advisors and Fowler White Burnett. Pipeline signed a 20-year lease for a full floor at the building and opened in October. One Financial Plaza includes an attached parking garage, a renovated lobby, new gym and conference space and a redesigned entrance, according to a Loopnet listing.

The office tower is about two blocks away from Las Olas Boulevard, which is going through a commercial and residential resurgence. In September, a JP Morgan investment manager sold the Las Olas City Centre office tower to Deutsche Bank for $220 million, marking one of the biggest office deals in South Florida in 2016.

And the sale of One Financial Plaza is the second big office building that Crocker has traded in recent months. The Boca Raton-based investment and management firm, along with Cornerstone Real Estate Advisers, sold the Esperanté Corporate Center in West Palm Beach to RedSky Capital for $126 million in July.

One Financial Plaza’s new owner, Walton Street Capital, has handled more than $8.4 billion of investments from public and corporate pension plans, foreign institutions, insurance companies and banks, endowments and foundations, trusts, and high net-worth individuals, according to its website. Affiliates of Walton Street Capital have invested more than $7.5 billion of equity into the private equity real estate investment firm.

The south tower’s condo association just filed suit against more than two dozen construction firms that worked on the Vizcayne project, alleging counts that range from negligence to breach of contract.

“There’s a full gambit of claims,” said attorney Darrin Gursky of law firm Gursky Ragan, which filed the suit on behalf of the association.

The alleged defects came to light as part of a 2015 report that the association commissioned from Atkins Engineers, which studied how Vizcayne’s south tower matched up to Florida building codes.

What the firm found, according to its report, was a variety of deficiencies and design flaws: leaky windows, corroded stucco and cracked concrete on the building’s exterior, “improper slopes” on a number of balconies that don’t allow water to drain, and a lack of watertightness for roughly 39 percent of the building’s post-tension cables, which give support to concrete slabs.

Gursky told The Real Deal that the association hopes to either have the defendants repair the shoddy work themselves, or foot the bill for having the defects corrected. The suit names Vizcayne’s general contractor W.G. Yates & Sons Construction Co., design firm Fullerton Diaz Architects, Crespo Consulting Engineers, as well as a laundry list of subcontractors.

A request for comment to an attorney representing W.G. Yates was not immediately returned.

The two luxury towers are located at the corner of Northeast Second Street and Biscayne Boulevard on the site of the former Everglades Hotel. They house a combined 849 units and are connected by a retail complex with 58,000 square feet of leasable space. Asking prices in the building currently range from $190,000 for a studio up to just below $3 million for a three-bedroom residence.

This isn’t the first time the Vizcayne complex’s condo associations have been wrapped up in litigation.

In November, the condo complex’s north tower and master association took aim at those same defendants with a pair of their own construction defect lawsuits, raising similar allegations of lackluster workmanship.

The north and south associations also recently settled a suit filed against affiliates of investment firm Rockwood Capital, which bought out the Vizcayne project in 2010 after the original developer, a U.S. subsidiary of Mexican real estate company GICSA, went bankrupt during the housing crash without finishing the two towers.

Wendover Housing Partners will open a newly built senior apartment complex in Tallahassee this week. Altamonte Springs-based Wendover is opening Kenwood Place, a 112-unit complex the company started constructing in October.

The one and two-bedroom units at Kenwood Place each feature a full-size washer and dryer, a monitored emergency-call system, and a fully-equipped kitchen including a dishwasher, microwave, island and pantry. All units also include walk-in and linen closets.

“While our units are affordable for seniors on a restricted budget, they’re designed with the same style and amenities you’ll find in high-end apartment communities,” Jonathan L. Wolf, president and founder of Wendover Housing Partners, said in a prepared statement.

Wendover’s other senior living properties in Florida include Haley Park in Tampa, The Landings at Sea Forest in New Port Richie, and Marci’s Pointe in Jacksonville.

From the New York site: The National Association of Realtors is not only the largest real estate lobbying force on the Hill, but one of the largest lobbying groups period.

A trade association of more than 1 million members, the NAR functions in part as a regulator of the brokerage industry, setting the rules for how brokers use Multiple Listing Services. (In New York City, REBNY, which seceded from NAR in the 1990s, maintains its own service.) NAR’s membership is mainly composed of residential and commercial brokers, but its lobbying arm is active on just about every political issue that touches real estate. According to an analysis from the Center for Responsive Politics, the group spent more than $64 million on lobbying activities in 2016, the second most of any group in any industry.

Jamie Gregory is NAR’s deputy chief lobbyist and has worked for the organization since 1994. As the majority-Republican Congress winds up to make big legislative changes with President Trump in the White House, Gregory and his team are focused on three major issues that they expect will dominate the real estate agenda in Washington for the next two years. The National Flood Insurance Program, which provides affordable flood insurance to millions of property owners nationwide, is set to expire in September, and some Republican congressmen have expressed interest in making deep cuts to the program. On tax reform, proposals from last year’s House blueprint have yet to be updated to clarify what happens to benefits that incentivized real estate investment. And as far as what happens to Fannie Mae and Freddie Mac, that’s going to take a little longer to work out a solution.

The Real Deal recently caught up with Gregory to discuss these issues and more. (The interview was edited and condensed for brevity and clarity.)

You’ve described reauthorization of the National Flood Insurance Program as a top legislative priority. What are the current political barriers to that?

Barriers might be too strong a word, but there’s two things. One, there’s the fiscal aspect. The program does have a deficit of approximately $25 billion, provisionally from Katrina and Rita and those storms. It was being paid down, but then Sandy put it back up again. So there is a debt to the U.S. Treasury that has to be recovered. The second issue is that there is a school of thought on the hill that the program should be privatized. As an organization, we’re open to some privatization or some increased private insurance in the marketplace, but we don’t think you can privatize it [entirely].

In the past, House Financial Services Committee Chairman Jeb Hensarling (R-TX) talked about wanting to shift more of the flood insurance market to the private sector. Will he be the key figure in how this plays out?

Rep. Sean Duffy (R-WI) is now the chair of the Housing and Insurance subcommittee, and Chairman Hensarling has really deputized Duffy to take the lead. In the previous congress, the subcommittee chair was Rep. Blaine Luetkemeyer (R-MO) and in December he put out a whole list of principles he thought should be followed. Duffy is taking those principles and collecting input from outside groups, members of Congress both on and off the committee with an interest in floods. At the moment, we’re kind of at an early stage here. We’ve met with his staff, we’ve talked about the principles. I wouldn’t say we’ve gotten to a roadblock. We’re communicating, trading information. We’re trying to be a resource for the questions that they have.

We’re asking for another long-term reauthorization to provide stability. The reason for that was that, in the early to mid-2000s, over the course of about seven years, the program was allowed to expire eight times. One of the expirations was lengthy and our analysis at the time was that there were 40,000 transactions per month that were either delayed or canceled because homeowners couldn’t get flood insurance and lenders were requiring it.

Comprehensive tax reform could eliminate deductions and deferrals that incentivize homeownership and real estate investment. Would you say you’re playing defense on tax reform right now?

In this town, once an idea gets out there, sometimes it never goes away.

Yes, I think that’s fair, although we don’t have legislative language yet. We don’t even have a discussion draft. We’re all basing our comment on the House blueprint, which was released in July and was essentially drafted by Speaker Paul Ryan (R-WI), House Ways and Means Chairman Kevin Brady (R-TX) and others. We’re basing our comment on that. We’re concerned about the elimination of the incentives for homeownership based on the blueprint. Granted, we understand the blueprint was a campaign document geared toward the November elections, so now we’re anxiously awaiting seeing some kind of legislative product that we can fully analyze and fully comment on.

So the fact that it was a “campaign document” means that some of it should be negotiable now?

This goes to the heart of doing away with the incentives. In the blueprint language, there are only two deductions that are retained and all other deductions are eliminated. The two deductions are charitable contributions and the mortgage interest deduction. The problem is that most people who currently itemize don’t get to the point where itemizing is more beneficial than the standard deduction until they own a home. It’s a combination of the mortgage interest deduction and the state and local property tax deduction that gives them that benefit. The blueprint eliminates the state and local property tax deduction and doubles the standard deduction but in doing that, according to their own analysis, less than five percent of tax filers will itemize. So while in name you’re retaining the mortgage interest deduction, in reality no one is going to use it.

So what’s the big deal?

You’re not making any difference between renting and owning, and the question is: do we want to be a nation of renters or do we want to be a nation of owners?

What about keeping the tax deferred 1031 exchange? The House blueprint was silent on this. Do you have any update on how 1031 will be affected in a draft tax reform bill?

The blueprint doesn’t mention 1031. The concern in the industry is that (now former) House and Ways Committee Chairman Dave Camp’s (D-MI) proposal from the last Congress did eliminate 1031s. In this town, once an idea gets out there, sometimes it never goes away. Chairman Brady spoke to our policy conference last week. When he was asked about 1031s, I think his response was that everything is on the table, so he didn’t specifically say and he’s taking input from people. So we’re up there talking about the economic value of 1031 exchanges and why we think they should be retained.

What are the must-haves in any reform of Fannie Mae and Freddie Mac?

We believe that whether its Fannie Mae or Fannie Mac or a new entity, there has to be an explicit government guarantee. Long-term fixed rate mortgages – 10-year, 20-year, 30-year – are all a product of the government guarantee. I do think this will come third (after flood insurance and tax reform). Chairman Hensarling wants to introduce his own version of GSE reform. Senator Mike Crapo, who chairs the senate banking committee now, has also said GSE reform is on his agenda. We’ll see legislation introduced and we’ll see hearings this year, but I think ultimately it’s far more likely a bill passes next year.

What would you say to Realtor members who say you spend too much money on lobbying?

Legislative advocacy, political advocacy is one of the services our members value the most when we talk to them about membership. When we survey them, advocacy is always near the top of the list, if not first then second. There’s a lot of reports about how much we spend on advocacy. Some of that, a big chunk of that, which puts us high in the list, is our activity on the state and local level, so it’s not all federal.

Our members are the practitioners. They’re the folks that are on the ground. I almost hesitate to say this, but for example, when GSE reform came up last time, there would be panels of think-tank folks who, if we lived in an economic vacuum, [what they proposed] would be ideal. And then inevitably there’d be a second panel of practitioners who would say “OK that’s great, but here’s how the real world exists.” Our guys are the real-world witnesses, which I think is part of our strength.

During the four-year period between 2012 and 2016, land prices in Wynwood more than quintupled and lease rates more than doubled, raising the question: Is the trendy arts and entertainment district growing too fast for its own good?

The answer is no, if investors and property owners can strike a balance between making immense profits with nurturing creative retail establishments and affordable housing so the neighborhood can retain its edgy character, according to a panel of developers discussing the 2017 Wynwood market report presented by the Commercial Industrial Association of South Florida, or CIASF, on Friday.

Tony Cho

“My biggest nightmare is if it became fast food alley or retailers were brought in that don’t keep in the spirit of what Wynwood is,” said panelist Tony Cho, founder and CEO of Metro 1. “We need to be responsible in how we curate our buildings and our projects. We have to protect Wynwood’s integrity.”

Fellow panelist and Goldman Properties Managing Director Joseph Furst agreed. “We can’t get complacent,” he said. “We can’t lose sight of how much work it took to where we are now.”

Indeed, Wynwood’s evolution into one of Miami-Dade’s most visited destinations has led to the success of local businesses such as Zak the Baker and Panther Coffee, and has attracted hip national brands like Kit & Ace, Bonobos and Scotch & Soda to the neighborhood.

As Wynwood has grown, prices for land and rented space have skyrocketed. According to the CIASF report, the maximum lease price per square foot increased from $40 in 2012 to $100 in 2016. The average land price in 2016 was $300 per square foot compared to $50 per square foot in 2012. The average building price jumped from $200 per square foot in 2012 to $1,000 per square foot in 2016.

Gaston Miculitski

Nevertheless, Wynwood remains a bargain compared to Lincoln Road or Coconut Grove, said panelist and BM2 Realty Partner Gaston Miculitzki. “Obviously rents are going up, but Wynwood is still about 50 percent cheaper,” he said. “My biggest concern are owners of properties or land who are just holding onto it and not activating it. That worries me.”

Alex Karakhanian, founder and CEO of LNDMRK Development, said Wynwood could also benefit from more office buildings. “Most of the offerings on the ground floor will eventually be unaffordable for businesses that are not retail oriented,” Karakhanian said. “I do think Wynwood is approaching some level of maturity. I think a little settling or plateauing of rents is a good thing.”

From the New York website: Fortress Investment Group – the $70 billion investment manager and parent of Coral Gables-based Florida East Coast Industries – is being acquired for $3.3 billion.

Japanese telecom giant SoftBank Group Corp. will buy the publicly-traded company for $8.08 per share – a 39 percent premium – the companies announced. SoftBank will operate Fortress alongside a soon-to-be formed $100 billion technology investment fund.

Fortress [TRDataCustom] principals Pete Briger, Wes Edens and Randy Nardone will continue to run the company within SoftBank, Bloomberg reported. Fortress was founded in 1998 and went public in 2007 in a $634.3 million IPO, debuting at $18.50 a share.

But the company’s performance slumped during the financial crisis and has traded as low as $.077 per share.

SoftBank’s acquisition is aimed at bringing investment talent in-house, a company spokeswoman said. The deal, which is subject to shareholder and regulators’ approval, is expected to close by the end of the year.

SoftBank has made $44 billion worth of investments and acquisitions since 2015, as it’s moved from being a telecom operator into a diversified investment company.

In a statement, founder Masayoshi Son said the Fortress deal would “expand our group capabilities” alongside a soon-to-be-established $100 billion Vision Fund platform.

The firm aims to close the first round of investment in the fund this month. SoftBank is contributing $25 billion to the fund, along with $45 billion from Saudi investors and $1 billion each from Apple Inc., Qualcomm Inc. and Oracle Corp. Chairman Larry Ellison.

Florida East Coast Industries, formerly a publicly traded company, was purchased by Fortress private equity funds in a deal valued at about $3.5 billion in 2007, according to Bloomberg. FECI subsidiary All Aboard Florida is developing Brightline, a $3 billion express-train service from Orlando to Miami. The MiamiCentral station, a massive train depot with residences, restaurants, shops and offices in downtown, is expected to be completed this year.